U.S. Bankruptcy Court Judge Michael Wiles granted Relativity Media a modest $9.5 million debtor-in-possesion loan on Friday, in the first hearing since the studio filed for Chapter 11 on Thursday.
CEO Ryan Kavanaugh’s company entered the proceedings in a New York courtroom with designs on a $45 million loan to cover operational costs as it struggles to reorganize its finances. Judge Wiles only approved the smaller amount, with $4 million allocated to pay “critical vendors” related to current TV and film projects.
A new hearing was set for August 14, when the judge will decide whether to grant access to the full loan amount sought by Kavanaugh and his board, under the supervision of Brian G. Kushner, the court-approved reorganization specialist.
Wiles also denied a request for an expedited sale-at-auction process, by which Relativity had hoped to sell off its assets by early October to satisfy its $320 million debt obligations.
“The ability to minimize the impact of this process on our employees and operations is among our most important priorities, and we are pleased that the Court has granted these motions, which will allow us to preserve value for our stakeholders,” Kavanaugh said in a statement.
“The orders the Court entered today are an important milestone in our reorganization. I look forward to building on this momentum to emerge as a stronger company.”
When approved and set, the sale will be conducted by investment banker Blackstone Group and supervised by the court.
After months of scrambling to fulfill a $320 million debt obligation to a group of lenders led by New York-based Anchorage Capital, Kavanaugh in his team filed for Chapter 11 protection on Thursday.
Joint ventures in which Relativity had a minority stake — Relativity Sports, Relativity EuropaCorp Distribution (RED) and Relativity Education — were not included in the company’s bankruptcy filing.
The company on Tuesday began laying off 72 full-time and 22-part time staffers — about one fifth of the company’s 350 employees — in anticipation of the bankruptcy filing.
The filing lists 50 unsecured creditors who will have to get in line at bankruptcy court to recover the money they’re owed. Those creditors include media buying company Carat USA, Technicolor, Deluxe, Cinedigm, Google, trailer house Buddha Jones, American Express and producer Andrew Panay.